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A Mortgage Banker In Amish Country

O'Brien's bank fared so well in part because mortgages on Amish properties can't be packaged and resold. Without electricity or traditional insurance, their farms and farmhouses stayed out of the Wall Street fray.NPR

Americans have been hearing for months now about the devastating problems facing U.S. financial institutions. But in at least one corner of the country, the banking system is doing just fine.

In the Old Order Amish community of Lancaster County, Penn., most people use credit only when they buy a farm. They live within their means, and borrow from people who expect to get paid back. For many Amish here, their first major piece of property is a horse and buggy.

One day this year, hundreds Amish men clumped around an auctioneer. Calling through a portable loudspeaker, he moved among dozens of buggies lined up in a muddy field. Each buggy has a big sign in the window announcing it as a brand-new 2008 model. Amish teenagers kick the tires and check out all the new extras, like the fiberglass wind screen and retractable cup holders carved out of maple wood.

One young man tells me a typical Amish kid gets his first buggy at 16 or 17. I ask whether your father buys it for you. "Yeah, dad buys it," he says.

The scene, in many ways, could be from any ordinary automobile auction. One major difference is that Amish people don't take out a buggy loan. In fact, most Amish don't have much debt at all. They don't use credit cards, instead paying for everything with cash or check.

About the only time the Amish use credit is when they buy a farm. Such a large purchase requires bargaining, and means working with a banker. There are no Amish bankers, no Amish-owned banks, so they turn to local banks for help. In this community, one banker stands above all others: Bill O'Brien.

O'Brien says 95 percent of his customers at the Hometowne Heritage Bank are Amish. As the head of agricultural lending, he's responsible for about $100 million in loans. O'Brien, who's not Amish himself, meets with his Amish customers only face-to-face. He's something of a Santa Claus, with a big beard and a belly laugh. He loves telling the jokes he hears from his Amish customers, even if outsiders don't get the punchline.

" 'Well,' she says, 'you don't get out a two-row corn picker for a little nubbin,' " he says, rolling out a joke that I think is supposed to be dirty.

'Never Lost Money On An Amish Deal'

In most banks, a man who wants to buy a farm but has no credit history, no FICO score and not even a driver's license would be unlikely bet. But O'Brien is used to this.

"I'll find out who his dad was," he says. "I'm also interested in who his wife's father was. It takes a team to make a farm go."

O'Brien says the Amish are less risky debtors than people with access to all the tools of modern banking. The Amish live well within their means — no splurging on iPods or HDTVs, no dinners out that they really can't afford. The Amish think that missing a payment brings shame — not just on them, but on their whole family, their whole community.

"We've never lost any money on an Amish deal," he says. "So, I'll stretch my neck more for with them than maybe I will somewhere else."

O'Brien has been doing this work for 20 years. He's made countless thousands of loans — with no problems. This year, he says, one guy was a few days late on one month's mortgage payment. Everyone else paid on time, every time.

But it's not as if O'Brien's work is easy. He puts 1,000 miles on his car — every week. His customers are not into Internet banking. No, O'Brien has to go and talk to them, on their farms.

He takes me to the top of a hill, from which we can see dozens of farms below. I ask him how many of these are clients. "Every house," he tells me.

'It's Our Loans'

O'Brien knows which farms are doing well and which are struggling. He has to. When you lend to the Amish, you're making a loan that you're going to keep. You can't sell that loan to some other investor.

That's because Amish loans can't be securitized — they can't be turned into a mortgage-backed security or a collateralized debt obligation — like all of those subprime loans that have caused so much trouble.

You can't do that for an odd legal reason. Homes that don't have electric power don't qualify for securitization. Neither do homes without traditional insurance. Amish homes are unmodernized, and the Amish use their own kind of insurance.

"It's our loans," O'Brien says. "We write them. We have to service them. I haven't had that experience where you just pass it along."

This old-fashioned system works. In this year of financial crisis, of storied old banks collapsing in hours, Hometowne Heritage has had its best year ever.

And with the total collapse of securitization and all those fancy financial tools, it's tempting to say: Hey, when it comes to buying a house, we're all Amish now.